[Congressional Record Volume 156, Number 166 (Wednesday, December 15, 2010)]
[House]
[Pages H8500-H8501]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           DEFICIT REDUCTION

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Massachusetts (Mr. Frank) is recognized for 5 minutes.
  Mr. FRANK of Massachusetts. Mr. Speaker, I have been troubled by what 
seems to me a mistaken focus in the debate about reducing the deficit. 
I do agree that it is important to reduce the deficit. Indeed, Mr. 
Speaker, I now believe that I am more focused on reducing the deficit 
than many of my colleagues, including on the other side of the aisle, 
who have with great alacrity put deficit reduction aside in favor of a 
fairly indiscriminate degree of tax reductions.
  A couple of weeks ago, we were told that reducing the deficit was the 
number one priority, but reducing the taxes, particularly on the 
wealthiest in America, rapidly overtook deficit reduction. I hope we 
will get back to it. What troubles me is the extent to which people, 
mainly on the Republican side, but elsewhere as well, have said that 
what we need to do most to get the deficit down, as we should, is to 
reduce entitlements. That's a polite way of saying they want to cut 
Social Security and Medicare and Medicaid, even though Medicaid is not 
an entitlement. But those are the things that are on the agenda.
  In fact, that is neither socially or economically the sensible way to 
begin with the short-term--near-term deficit reduction we need. We 
shouldn't say short-term. We do, I believe, need some stimulus. I'm 
glad we are extending unemployment compensation. I wish we were doing 
more to help cities and States keep people on the payroll. The private 
sector has added jobs in these past few months. Job growth has been 
held down because the public sector has been forced at the State and 
local level to fire people. But this focus on Medicare and Social 
Security is mistaken economically and politically.
  Mr. Speaker, let me calculate; about 45 years ago, I took an 
economics course in graduate school from a young assistant professor 
named Henry Aaron. I was impressed with him then, and I've been 
impressed with him since. In the New York Times recently he had an 
article in the op ed page headlined: ``All or Nothing Equals Nothing,'' 
in which he argued that the focus on reducing the deficit by 2020, 
which is the time we've set ourselves, which is very important, is an 
issue that should not encompass a focus on Social Security and 
Medicare.
  He is not saying ignore Social Security and Medicare, only that a 
rational way to go after the deficit in the near term wouldn't focus on 
them. And Social Security, as he points out, Social Security is not 
going to be contributing to the deficit at that point. Indeed, Social 
Security at this point is in such good economic shape that people have 
decided Social Security should be a contributor to economic stimulus 
because we are reducing the revenue that comes into Social Security for 
2 years by reducing the payroll tax.
  Now I think that's a useful stimulus, but I regret the fact that it 
was not accompanied by a binding piece of legislation that will return 
that money from elsewhere in the general fund so that we don't put 
Social Security further in the hole. But as Henry Aaron points out, 
yes, we should begin to look at Social Security and the problems of 30 
years from now. My own view is that you do that mostly by increasing 
the level of income on which the tax is levied, but there is no need to 
begin doing that right away.
  I should have said this earlier, Mr. Speaker. Two of the greatest 
accomplishments of America in the 20th century, Social Security and 
Medicare, accomplished an important goal. They made it the case that 
poverty was no longer going to be the rule for many older people. Prior 
to Social Security and then Medicare, poverty was too often the reward 
for living long enough if you weren't rich. We have brought older 
people on the whole--not entirely--out of poverty. There are still 
enough low-income older people that I greatly regretted the fact that 
this House and the Senate, which are apparently ready to give 
multimillionaires tax breaks, couldn't support $250 per person for 
Social Security recipients, some of whom were wealthy but many of whom 
are quite poor. And I have people saying, Well, you don't want to give 
Warren Buffett $250. Mr. Buffett, to his credit, has objected to a 
$250,000 grant that he is being offered--more than that--in the tax 
reduction that is being offered--tax reduction from what current law 
would be.
  But Henry Aaron makes the point that focusing on Social Security is 
taking up a very controversial issue way prematurely. And as for 
Medicare, here is what he said, which is of great social and economic 
importance: ``To slash Medicare and Medicaid spending before reforms to 
the health care system bear fruit would mean reneging on the Nation's 
commitment to provide standard health care for the elderly, the 
disabled, and the poor. The only realistic way to realize big savings 
in the two programs is to reform the entire health care payment and 
delivery system in a way that will slow the growth of all health 
spending.''

  I am asking, Mr. Speaker, that Members read this. Henry Aaron is a 
great

[[Page H8501]]

economist. He has studied Social Security as well as anybody. He has 
studied Medicare. He makes the point that focusing almost exclusively 
on those--or primarily on those--as a way to end the deficit is bad 
social, economic, and political policy.
  Let me say at this point, Mr. Speaker, speaking for myself, not for 
Aaron, there are things we can do in the near term. If we hadn't gone 
into Iraq, that terribly mistaken war in which so many brave Americans 
suffered, we would have a trillion dollars more than we have today. We 
are grossly overextended in having military presence all over the world 
where it is needed and where it isn't. We continue to spend tens and 
tens of billions of dollars a year protecting Western Europe when 
they're not in danger and can protect themselves.
  So let's focus on reducing military spending, let's rationalize 
agriculture spending, let's put some restraints elsewhere. But as Henry 
Aaron correctly points out in this article, let's not make the mistake 
of focusing on Social Security and Medicare, prematurely in the case of 
Social Security, and in a socially destructive way with regard to 
Medicare and Medicaid.

                        All or Nothing = Nothing

                          (By Henry J. Aaron)

       Washington.--Two plans for reducing the federal deficit are 
     now on the table. One of them, proposed by the chairmen of 
     President Obama's debt-reduction commission, Erskine Bowles 
     and Alan Simpson, was endorsed on Friday by 11 of the 18 
     panel members. The other comes from the nonprofit Bipartisan 
     Policy Center. The two plans differ in important ways, but 
     both put everything on the table, including not only things 
     like tax rates and defense spending but also Social Security, 
     Medicare and Medicaid.
       This approach is mistaken, and it's at the heart of why 
     both plans are unlikely to succeed, Deficit reduction should 
     stop debt from growing faster than gross domestic product--
     and do so within the next decade. But closing the projected 
     long-term gap between Social Security spending and revenues 
     and materially slowing the growth in Medicare and Medicaid 
     spending will take much longer.
       The Bipartisan Policy Center's proposal illustrates this 
     temporal mismatch. It aims to prevent government debt--now 
     equal to roughly 60 percent of gross national product from 
     growing faster than income does. After some additional 
     increase during the current economic slowdown, this plan 
     would return the ratio of debt to income to below 60 percent 
     by 2020. To that end, it would lower government spending and 
     raise taxes by $5 trillion over that period. Its menu is 
     replete with controversial items--including cuts in defense 
     spending, a national value-added tax and myriad cuts in 
     domestic spending.
       The most highly charged suggestions, however, are its 
     proposed changes in Medicare, Medicaid and Social Security. 
     The plan would convert Medicare into a voucher system under 
     which the elderly and disabled would receive money to buy 
     health insurance. The value of this voucher would increase 
     more slowly than health care costs have grown for the the 
     past half century. The proposal would also raise by two- to 
     five-fold the states' share of part of Medicaid costs.
       The Bipartisan Policy Center's plan would also reduce the 
     share of earnings that Social Security would replace for 
     future retirees. This ``replacement rate'' is already set to 
     decline under current law, but the plan would cut it further, 
     by as much as 22.5 percent.
       The proposed changes in Social Security, Medicare and 
     Medicaid (whose acceptance by Congress is not assured, to say 
     the least) account for only 5 percent of the deficit 
     reduction that the overall plan would achieve by 2020. To be 
     sure, they promise to do considerably more in later years. 
     But they are largely extraneous to the immediate goal of 
     deficit reduction and debt stabilization by 2020.
       The president's debt-reduction commission advances even 
     larger changes to Social Security--cuts of up to 41.5 
     percent--a longer list of near-term changes to Medicare and a 
     blanket cap on the longer-term growth of overall health care 
     spending. But approach is similar to that of the Bipartisan 
     Policy Center's in that it relies primarily on cuts in other 
     government spending and on tax increases to reduce the 
     deficit.
       Stabilizing the debt must begin as soon as economic 
     recovery is well established and must be accomplished over 
     the next decade in order to prevent the ratio of debt to 
     G.D.P. from becoming excessive. Timely deficit reduction is 
     therefore urgent. Asking Congress simultaneously to reform 
     three of the most important and complicated government 
     programs only jeopardizes the solution of the more immediate 
     problem.
       The Social Security challenge plays out over the next 
     quarter-century. Early legislation to close the gap between 
     revenues and spending is desirable, because changes will be 
     less onerous if they are phased in. If President Obama 
     believes that a commission could help to restore balance in 
     Social Security, he should appoint one now, but its work 
     could not do much quickly to help reduce the deficit.
       The fiscal challenge posed by Medicare and Medicaid is 
     vastly larger and infinitely more difficult to meet than that 
     posed by Social Security. Some modest savings in Medicare are 
     manageable, along the lines suggested by both commissions, 
     including increased premiums for upper-income beneficiaries 
     and modest increases in Medicare deductibles.
       As for Medicaid, its benefits are already stringently 
     limited in some states. In others, payments to providers are 
     so low that doctors shun the program and hospitals suffer 
     losses. To reduce Medicaid benefits now, just as the 
     Affordable Care Act will be adding roughly 16 million new 
     beneficiaries, would risk chaos.
       To slash Medicare and Medicaid spending before reforms to 
     the health care system bear fruit would mean reneging on the 
     nation's commitment to provide standard health care for the 
     elderly, the disabled and the poor. The only realistic way to 
     realize big savings in the two programs is to reform the 
     entire health care payment and delivery system in a way that 
     will slow the growth of all health spending, The Affordable 
     Care Act is intended to initiate such systemic reforms. The 
     best way to rein in growth of spending on Medicare and 
     Medicaid is to put the provisions of that law into action, 
     but this will take many years.
       The job that should not be delayed, to stop excessive 
     growth in the federal deficit, is challenging but doable: 
     curb tax expenditures (including tax deductions, credits, 
     exclusions and exemptions); end at least some of the tax cuts 
     that were enacted under President George W. Bush; enact many 
     of the cuts in defense spending advocated by both budget 
     commissions; limit, but not eviscerate, other discretionary 
     spending; and gradually increase Medicare premiums for upper-
     income beneficiaries.
       Congress and President Obama should adopt a three-stage 
     program: start deficit reduction as soon as recovery is 
     securely under way, reform Social Security soon and 
     resolutely carry out the Affordable Care Act so that the 
     growth of Medicare and Medicaid can be slowed, Trying to do 
     everything at once only makes it difficult to do anything at 
     all.

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